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2008 DIGILAW 540 (KAR)

Kailashi Devi G. Agarwal v. Income Tax Officer

2008-09-22

S.N.SATYANARAYANA, V.G.SABHAHIT

body2008
JUDGMENT V.G. Sabhahit, J.— This appeal by the Assessee is filed being aggrieved by the order passed by the Income Tax Appellate Tribunal, Bangalore Bench-C, dated December 19, 2003, in I.T.A. No. 605/3ang/2003 confirming the order passed by the Commissioner of Income Tax (Appeals), Hubli, dated March 27, 2003. 2. The essential facts of the case leading to this appeal are as follows: 3. The Assessee had filed return of income on October 10, 1998, declaring total income of Rs. 92,950. The same was selected for scrutiny with prior approval of the Additional Commissioner of Income Tax, Range I, Hubli. The Assessee had shown capital loss on sale of diamond amounting to Rs. 1,038 and a perusal of personal capital accounts revealed that there is accretion of Rs. 8,29,330 on account of sale of gold jewellery and diamond. Notices under Section 143(2)(i) were issued on September 30, 1999, informing the Assessee to appear on October 14, 1999 with the books of account, bills, vouchers and details of assets acquired. The Assessee appeared through Sri R.H. Agarwal, a chartered accountant and produced the books of account maintained by her as proprietor of M/s. Kailash Traders. To show that gold was sold to Sri Mahalakshmi Jewellers on January 27, 1998 for Rs. 4,08,080 and diamond was sold to M/s. Sheetal Exports, Surat for Rs. 4,21,250, a copy of the bank pass book was filed on November 29, 2000. It was also contended that the Assessee had filed a declaration under the Voluntary Disclosure of Income Scheme, 1997, on December 23, 1997 under Section 68(2) of the said Scheme (hereinafter called "the Scheme, 1997"), wherein she had declared the income in the form of gold jewellery and diamond for the value of Rs. 3,51,213 in respect of the assessment year 1987-88 and the report of the valuation of the jewellery and ornaments was also filed. The said application was accepted and a certificate had been issued on December 27, 1997, by valuing the said gold and diamond by the indexed method and the same has been declared in the return of income filed on October 16, 1998. The assessing authority by order dated March 30, 2001 held that the Assessee had failed to prove the transaction of sale to M/s. Mahalaxmi Jewellers for an amount of Rs. 4,08,030 and the sale of diamond for Rs. 4,21,250 to M/s. Sheetal Exports, Surat. The assessing authority by order dated March 30, 2001 held that the Assessee had failed to prove the transaction of sale to M/s. Mahalaxmi Jewellers for an amount of Rs. 4,08,030 and the sale of diamond for Rs. 4,21,250 to M/s. Sheetal Exports, Surat. Having regard to the statements recorded by him and after considering the contentions of the Assessee, the assessing authority also held the sale proceeds as income and charged the entire credit of Rs. 4,08,080 and Rs. 4,21,250 as income from other sources under Section 68 and deduction was given to the amount that was declared under the declaration filed under the Scheme, 1997, towards gold jewellery and diamond. Being aggrieved by the said order passed by the assessing authority, an appeal was filed before the Commissioner of Income Tax (Appeals), Hubli, by the Assessee. 4. In the said appeal the order passed by the assessing authority was confirmed, however, it was ordered that the Assessing Officer will treat the entire amount of Rs. 8,29,330 as the income of the Appellant therein. Being aggrieved by the said order dated March 27, 2003, an appeal was preferred before the Income Tax Appellate Tribunal. The Tribunal by order dated December 19, 2003, confirmed the order passed by the Commissioner of Income Tax (Appeals) and dismissed the appeal. Being aggrieved by the said order passed by the Income Tax Appellate Tribunal, the Assessee has preferred this appeal under Section 260A of the Income Tax Act, 1961. 5. The appeal was admitted on July 13, 2004. We have heard the learned Counsel for the Appellant and the learned Counsel for the Respondent/ Revenue. 6. The learned Counsel for the Appellant has taken us through the orders passed by the assessing authority as also the first appellate authority and the Tribunal and the declaration made by the Assessee under the Scheme, 1997, on December 23, 1997, as per annexure F to the appeal. He submitted that the gold jewellery and diamond which had been declared under the application filed under the Scheme, 1997, were converted into gold bullion in Sri Balaji Refineries belonging to Jaganlal and thereafter, the same were sold to Sri Mahalaxmi Jewellers by the Assessee. He submitted that the gold jewellery and diamond which had been declared under the application filed under the Scheme, 1997, were converted into gold bullion in Sri Balaji Refineries belonging to Jaganlal and thereafter, the same were sold to Sri Mahalaxmi Jewellers by the Assessee. It is submitted that the gold jewellery and the diamond that are the subject-matter of sale and are the gold jewellery and the diamond which had been declared under the Scheme, 1997, and wherefore, the question of treating the said transaction as a sale under Section 68 would not arise. The learned Counsel also submits that the property sold has been shown in the regular returns, as per the amount received by way of sale and indexing in respect of the same properties which were the subject-matter of application filed under the Scheme, 1997, does not arise. Therefore, he submits that the finding of the Tribunal confirming the order of the first appellate authority who in turn had confirmed the order passed by the assessing authority is liable to be set aside. 7. On the other hand, the learned Counsel for the Respondent Revenue submitted that what was declared in the application filed under the Scheme, 1997, was gold jewellery and diamond for the value of Rs. 3,51,213 and as per the regular returns, the amount that is shown by way of sale is Rs. 4,08,080 in respect of gold jewellery and Rs. 4,04,215 in respect of the diamond and wherefore, having regard to the amount which is shown in the regular returns and the amount that was shown in the declaration made under the Scheme, 1997, the assessing authority having found that the transaction regarding sale of jewellery by converting gold jewellery into bullion to Sri Mahalaxmi Jewellers, was the gold jewellery and diamond which was the subject-matter of declaration filed under the Scheme, 1997, had not been proved by the Assessee and the said transaction is fictitious and wherefore, the assessing authority has rightly passed the order of assessment which has been confirmed by the first appellate authority and the Tribunal. Having regard to the abovesaid facts as the property that is sold under the transaction as explained by the Assessee is not the property that was declared for assessment under the Scheme, 1997, the order of assessment passed by the assessing authority that has been confirmed in appeal by the first appellate authority and the Tribunal is justified and does not call for interference in this appeal. 8. We have given anxious consideration to the contentions of the learned Counsel for the parties. Having regard to the contentions advanced by the learned Counsel for the parties, the substantial questions of law that would arise for our determination in this appeal are: (1) Whether the finding of the Income Tax Appellate Tribunal that the sale transaction as revealed in the regular returns filed are taxable under Section 68 of the Income Tax Act is perverse or arbitrary for non-consideration of the material fact, as to whether the goods that are sold under the transactions relied upon by the Assessee are the same goods which had been declared under the application filed under the Voluntary Disclosure of Income Scheme, 1997, which was accepted by the Revenue ? (2) What order ? 9. We answer the above substantial questions of law as follows: (1) In the affirmative. (2) As per the final order for the following reasons. 10. Point Nos. 1 and 2: We have been taken through the application filed by the Assessee under the Scheme, 1997, as also the certificate issued by the revenue accepting the said application. We have also been taken through the order passed by the assessing authority, first appellate authority and the Tribunal as also the report of valuation of jewellery and ornaments filed along with the application filed under the Scheme, 1997, as also the contents of the documents as annexure to this appeal. 11. It is clear from the perusal of the material on record that having regard to the peculiar facts and circumstances of the case and the abovesaid material on record and the contentions of the respective parties, the fact that the Assessee had filed an application claiming benefit under the Scheme, 1997, declaring gold jewellery and diamond which was valued at Rs. 3,51,213, which has been accepted by the Revenue by issuing a certificate on December 27, 1997, cannot be disputed. 3,51,213, which has been accepted by the Revenue by issuing a certificate on December 27, 1997, cannot be disputed. It is also clear from the perusal of the material on record that the Assessee has effected sale transactions in respect of gold jewellery and diamond, as claimed in the regular returns filed, is not in dispute. However, the real question that was required to be decided by the first appellate authority and the assessing authority was as to whether the subject-matter of the sale transaction is in respect of the goods that were the subject-matter of declaration filed under the Scheme, 1997, which declaration has been admittedly accepted by the Revenue. If the Assessee is able to prove that what is sold under the sale transaction claimed by the Assessee in the regular return filed pertains to the gold jewellery and diamond which was declared in the application filed under the Scheme, 1997, the contention of the Assessee that what is sold under the sale transaction and declared under the regular returns is the gold jewellery and diamond that was the subject-matter of application filed under the Scheme, 1997, and cannot be taxed under Section 68 has to be accepted. However, if the Assessee is not able to prove that the subject-matter of transaction declared in the regular returns is the same goods which is declared under the application filed under the Scheme, 1997, and accepted by the Revenue, then it is clear that the Assessee is bound to pay tax on the sale transactions, as what is sold is not the property which is the subject-matter of application under the Scheme, 1997. This proposition cannot be disputed by the counsel for the parties. When the finding given by the assessing authority, which is confirmed by the first appellate authority and the Tribunal in appeal is considered, it is clear that there is no specific finding on this material fact, which would decide the contention of the Assessee or the Revenue. Depending upon the finding that may be given by the assessing authority, the Assessee is bound to pay tax under Section 68, if the Assessee has not been able to prove that the goods that are sold under the transaction declared under the regular returns are the goods which were declared and accepted under the application filed under the Scheme, 1997. If the Assessee is able to prove that the goods that are sold under the transaction declared in the regular returns are the goods which were declared in the application filed under the Scheme, 1997, and accepted by the Revenue, then the question of taxing the transaction declared in the regular return under Section 68 would not arise and tax has to be imposed under Section 45 of the Income Tax Act, 1961. Since this material fact has not been considered by the assessing authority or the first appellate authority or the Appellate Tribunal, it is clear that the finding given by the Income Tax Appellate Tribunal confirming the order of the first appellate authority, who in turn had confirmed the order of the assessing authority imposing tax under Section 68 cannot be sustained and the same are liable to be set aside. As the authorities have not given a finding on the material fact, a finding has to be given now by the assessing authority, as to the abovesaid material fact as to whether the Assessee is able to prove that the subject matter of the goods which are sold as per the sale transactions declared under the regular returns filed for the assessment year 1998-99 is in respect of the same goods which were the subject-matter of application filed under the Scheme, 1997, and accepted by the Revenue, as per the observations made in the body of this order. Accordingly, we answer the substantial questions of law raised for our determination and pass the following: ORDER 12. The appeal is allowed. The order passed by the Income Tax Appellate Tribunal, Bangalore Bench "C" in I.T.A. No. 605/Bangalore/2003 for assessment year 1998-99 confirming the order passed by the Commissioner of Income Tax, Hubli dated March 27, 2003 who in turn had confirmed the order passed by the Assessing Officer, Ward-1(3), Hubli, dated March 30, 2001, is set aside and the matter is remitted to the Income Tax Officer, Ward-I(3), Hubli, for passing fresh orders in the light of the observations made in the body of the order.